The retail analysts at Standards & Poor Equity Research predict that 2011 will be a good year for retailers as consumer spending rises 3%, with sales boosted by the extension of the Bush-era tax cuts and the 2% payroll tax cut for all workers for one year.
"We think this 'tax holiday' will have a significant impact on spending, as the median income family earning about $50,000 per year will receive an additional $1,000 in its paychecks and those earning $106,800, the current limit of FICA taxes, and above will take home about $2,100 more this year,” said Marie Driscoll, group head of the Consumer Discretionary Retail analysts at S&P Equity Research.
In addition to the positive sales gain, the S&P analysts identified the following trends for retailers in 2011 and the medium-term future:
- Many retailers, such as Abercrombie & Fitch, Polo Ralph Lauren and Tiffany, will increasingly focus on international markets (especially emerging markets) to boost growth rates. Also expected: opportunistic domestic store closures for many retailers.
- Aggregate online retail growth of 10% as consumers increasingly migrate to online sites for convenience and value. At the same time, consumers are becoming increasingly channel agnostic.
- Mobile commerce will become more common, as demands by consumers to price comparison shop prompt retailers to enable Wi-Fi hot spots in their stores. In addition, sales clerks, like consumers, will also be empowered by greater access to information.
- Companies will likely rely more on social media, not only by responding to consumer complaints, but also to market products and unveil promotions.
- Consumers will increasingly seek out organic or green products that are better for the environment, but not at the cost of foregoing fashion.
- Retailers will likely increasingly cater to (and meet) individual consumer demands by providing greater service and marketing through the use of computer algorithms to analyze past shopping activity. My Macy's, which now individualizes 1,000 mailings to its customers, is a great example of this.
- Continued bifurcation of the retail market with high-end luxury stores benefiting from the wealth effect and low-end stores being aided by value-seeking consumers.
- Consumers are always seeking new and exciting experiences. Retailers that are able to thrill, surprise, delight, and engage, will probably win.
- Retailers and brands will test the waters of mass collaboration, providing the consumer community input in product design. This further engages the consumer, and brings about a whole new meaning to the word "personalization."
- Coupons are fast becoming ubiquitous through increased connectivity. Be it online or on their mobile phones, more and more consumers are searching for coupons as a means for creating value from their purchase.